Stocks Close Mixed Following Lackluster Trading Session - U.S. Commentary

(RTTNews) - Stocks turned in a lackluster performance throughout much of the trading session on Friday after failing to sustain an initial upward move. The major averages spent the day bouncing back and forth across the unchanged line before closing mixed.

While the tech-heavy Nasdaq inched up 8.27 points or 0.2 percent to a nearly one-month closing high of 4,590.47, the Dow slipped 57.32 points or 0.3 percent to 16,639.97 and the S&P 500 edged down 3.65 points or 0.2 percent to 1,948.05.

Despite the mixed performance on the day, the major averages moved notably higher for the second straight week. The Nasdaq surged up by 1.9 percent, while the Dow and the S&P 500 jumped by 1.5 percent and 1.6 percent, respectively.

The choppy trading on Wall Street came as traders reacted to the release of a batch of largely upbeat U.S. economic data.

While the reports eased concerns about the possibility of a recession, the data also led to renewed worries about the outlook for interest rates.

Shortly after the start of trading, the Commerce Department released a report showing that personal income and spending both increased by 0.5 percent in January, exceeding estimates.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the increase in spending indicates there is no danger of the economy falling into an imminent recession.

However, the report also said a key reading on core consumer prices rose by 0.3 percent in January, pushing the annual rate of growth up to 1.7 percent from 1.5 percent.

"Yes, 1.7% is still below the Fed's 2% target," said Ashworth. "But remember that the Fed's current forecast is that core inflation would be only 1.6% at the end of this year."

He added, "Some Fed officials wanted to wait until they could see the whites of inflation's eyes. Well, here it is coming over the horizon."

A separate report from the Commerce Department showed that economic growth slowed by less previously estimated in the fourth quarter of 2015.

The report said real gross domestic product increased by 1.0 percent in the fourth quarter, reflecting an upward revision from the initially reported 0.7 percent growth.

The University of Michigan also released a report showing a smaller than initially estimated drop in consumer sentiment in February.

Sector News

Despite the lack of direction shown by the broader markets, substantial weakness was visible among airline stocks. The NYSE Arca Airline Index plummeted by 7.1 percent after ending the previous session at a nearly two-month closing high.

Within the airline sector, shares of Republic Airways (RJET) plunged by 73.3 percent after the regional airline filed for Chapter 11 bankruptcy protection.

Gold stocks also moved sharply lower on the day, dragging the NYSE Arca Gold Bugs Index down by 3.7 percent. The weakness in the sector came as the price of gold for April delivery tumbled $18.40 to $1,220.40 an ounce.

While utilities stocks also came under pressure amid concerns about higher interest rates, oil service stocks showed a strong move to the upside. Reflecting the strength in the sector, the Philadelphia Oil Service Index surged up by 3.5 percent.

Rowan (RDC) helped to lead the sector higher, with the offshore oil and gas contract drilling services provider jumping by 10 percent after reporting better than expected fourth quarter results.

Financial stocks also saw significant strength on the day, with the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index climbing by 2.4 percent and 1.5 percent, respectively.

Electronic storage, natural gas and biotechnology stocks also moved notably higher, offsetting the weakness seen in the aforementioned sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index surged up by 2.5 percent.

The major European markets also showed strong moves to the upside on the day. While the U.K.'s FTSE 100 Index surged up by 1.4 percent, the French CAC 40 Index jumped by 1.6 percent and the German DAX Index soared by 2 percent.

In the bond market, treasuries moved notably lower on the heels of the upbeat economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 6.5 basis points to 1.762 percent.

Looking Ahead

Economic data is likely to continue to attract attention next week, particularly the closely watched monthly jobs report due next Friday.

Ahead of the jobs report, traders are likely to keep an eye on reports on manufacturing and service sector activity, pending home sales, and private sector employment.